The resignation of Shlomo Rodav as chairman of Tnuva Food Industries Ltd. raises a big question about the continued conduct of the company and its business plans. Rodav came to Tnuva to prepare the company for sale, after the social protest hit its financial results and greatly damaged its reputation. The protest also put paid to one of the main components of Tnuva's business plan: raising prices.
Sources inform ''Globes'' that, before the protest, Tnuva's business plan included a calculation of the extra profit the comany would make as a result of the price hikes policy.
Although at first it was said that Rodav would have a free hand to run Tnuva, the way he chose to improve the company caused Apax Partners to rethink the matter. Rodav said that he resigned over "professional differences of opinion", but his aides say that he decided to leave when he realized that he did not have a free hand to run the company.
Either way, Rodav took a clear line, without zigzags, guided by the aims of stopping the hemorrhaging, getting out of loss-making operations and non-core businesses, and promoting aggressive streamlining. He also sought to invest hundreds of millions of shekels in infrastructures to improve product quality. He kept saying that Tnuva would see investments the likes of which it had never seen before.
Apax's shame exposed
Rodav's most important act was to close Tnuva's Romanian operations, which had cost it hundreds of millions of shekels. Tnuva had tried to sell the business, or merge it with a local company, for months. The effort failed, and the losses mounted. Rodav decided to cut the losses, and Apax's shame was exposed. The closing of the operations showed that it was not meeting its commitments to suppliers, leaving behind debtors, including European banks. That did not help Apax's image.
Following the closure, previously unknown, or only partly known, figures were revealed. Apax thought the closure could have been handled more elegantly, in a way that would have avoided embarrassment to Tnuva, and would not have shown it up as a company that did not know the extent of its losses.
Rodav's position was to examine each operation on its merits, i.e. no loyalty to brand, activity, or partner, if they did not deliver the goods in the form of profit. Tnuva's management says that the idea was to sell or quit all loss-making operations, and that the decisions were supposed to be taken on the basis of the financial results for the first quarter of 2012. In other words, very soon.
Rodav also wanted to consolidate the Tel Yosef Dairy, which produce yellow cheeses, with Alon Tavor Dairy, which produces cottage cheese, Yoplait yogurts, and other products. Tnuva was preparing to invest NIS 230 million in Alon Tavor, and Rodav thought that the proximity of the two dairies, and the fact that the Tel Yosef Dairy was much less advanced, created redundancies. Closing the Tel Yosef Dairy was supposed to result in greater efiiciency, but it would also cause many layoffs.
"No eggs will be loaded on milk trucks"
In addition to Tnuva's very profitable dairy operations and the phenomenal return on investment that Apax recorded on the company's real estate, Tnuva also has operations that lose money, or only break even. Rodav wanted to sell Tnuva's Adom Adom meat business, and review its frozen fish business. Other operations were to be discussed.
The sources added that Rodav also wanted to streamline Tnuva's egg business, by consolidating the eggs and milk products distribution by the same trucks on days when dairy distribution was not heavy. Tnuva's workers committee blocked the pilot program. Workers committee chairman Ahiav Simhi told "Globes", "No eggs will be loaded on milk trucks."
The pilot was supposed to settle the question about the future of Tnuva's eggs business, which has always had a low profit margin.
Under Rodav, Tnuva also began to consolidate its Harduf and Soy Magic health food businesses. According to assessments at the company, Harduf would cease operating as a separate company, and most of its employees were at risk of losing their jobs.
The opening shot in the aggressive streamlining, which was also supposed to include the dairies, was the firing of scores of headquarters employees. Rodav believed in taking a harder line against the employees. In his view, the method he employed at Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) was the right model, but the price would be paid by hundreds of laid off employees.
Athough Apax strongly wanted to add value to Tnuva, it did not see eye to eye with Rodav on his plans. The result: after a long meeting with Apax partner Nico Hansen, Rodav left the keys on the table.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2012
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